Greek Leaders Fail to Agree To Terms

Fox has just reported that Greek leaders have failed to agree on reforms and austerity measures needed to secure a bailout to avoid a messy default, "forcing Finance Minister Evangelos Venizelos to go to the country's financial backers with an incomplete deal".

The problem is that if they do accept the bailout, this is a major time bomb that will explode int the future.


"Athens' partners in the European Union and the International Monetary Fund are increasingly exasperated by a lack of agreement on the measures they demand in return for a 130 billion euro ($172 billion) bailout and time is running out for Greece before a major March 20 bond redemption.


Euro zone officials say the full package must be agreed with Greece and approved by the EU, IMF and European Central Bank by Feb. 15"

Canada: Highest Population Growth In G-8

Canadian census data was released today.

Canada has the highest population growth of the G8:

BLS Labour Surge or Labour Headache? How About Using Income Taxes in Real-Time?

Something I have wondered for a lonmg time is why don't they use collected taxes to determine the number of jobs as opposed to this BLS predictions and estimates figures.

Well, Trimtabs seem to be just that! The results are expected: not good.

" The biggest headline for all financial media today is that the US economy added a much more than expected 243,000 jobs in January, and 446,000 jobs over the past two months. That is many more new jobs than our estimate of less than 50,000 for January and our estimate of 90,000 for December and January.


Our estimate of a slowly growing economy is based primarily upon daily income tax collections. Either there is something massively changed in the income tax collection world, or there is something very suspicious about today’s Bureau of Labor Statistics hugely positive number. We continue to check and recheck our analysis of income tax collections. We are aware that another service believes that incomes are growing faster than we do. So far we have not found any errors or discrepancies in our work, but if we do, we will let you know.

No one I know has any idea as to how the BLS does this seasonal adjustment. BLS historic data is changed almost every month until the income tax returns for each year are available three years in arrears. In other words, the BLS currently has accurate data for 2008 and before.

I keep repeating that the BLS refuses to use the data embedded in income tax collections to be able to report real time jobs and wages. Why does it refuse? Could the reason it refuses to use real time data on jobs and incomes be because perhaps this jobs number is politically motivated? The entire world is looking at US job creation as a proxy on how well Obama is doing? Could the Obama administration be pressuring its economist employees to create the best possible new jobs number?

Obviously I am quite suspicious of the numbers that I see in today’s BLS press release. Remember most financial journalists and even stock market strategists do nothing more than rewrite government press releases. So do not expect very few others to question the good news".

Simply Crazy: Bailout Funds Must Be Used by Greece to Pay Debt Only; Therefore Greece Must No Longer Have a Deficit!?

The current Greek fiasco news on the media reads:  "European officials are insisting any new Greek bail-out programme specifically earmark funds to pay off remaining holders of Greek debt, giving lenders the freedom to withhold aid to Athens without risking a messy default that could reignite panic in financial markets".

Thus, if the bailout funds are to be sued to pay off prior debt only, then, Greece must no longer be running  a deficit since it would nto required money to fund operations.

Apparently, the latest plan says Eurozone officials would create an escrow account to accept new bail-out funding instead of paying it all directly to Athens"

"The new fund would then ensure bondholders are paid off, while additional cash to run the Greek government could still be withheld if Athens did not live up to tough new reform demands".

So, they give bailout money to pay banks only then (?!). Simple Crazy.

European Debt Is Not Manageable Until 2030; Rises To 82.2% of Output

The World Bank had said last month that Europe's debts may not reach manageable levels until 2030. Today, Eurostat said that the European Union's total government debt rose to 82.2% of economic output in Q3 2011.

Estonia had a debt-to-GDP ratio of 6% in the third quarter, compared with 159.1% in Greece!

Interestingly, while all the news and media has been focused on Europe, this figure is lower than the United States


For the 17 country euro zone, total government debt fell slightly to 87.4% of GDP (U.S. debt-to-GDP was  100% in 2011).
Only 13 EU members had debts below the 60% set by the European Commission (that the bloc judges to be the maximum for a healthy economy), with only four of those countries being members of the 17-nation single currency area.

France and Britain both had a level of 85.2% and Germany was at 81.8% in the July to September period.

Unemployment Numbers, Youth Unemployment In Crisis 11.3% in U.S., 48% in Spain; 7% in Germany

Not all  the media is focusing today on the "good" unemoployemnt numbers for the U.S, and the bad ones for Canada.

Brazilian newspaper O Estado de Sao Paulo reports today on the current unemployment numbers for youth. The crisis for the youth is still really bad. Some youth unemployment numbers:

• Spain: 48.7%
• Italy: 31%
• Portugal: 30.3%
• France: 23.8%
• U.S. 16.8%
• Germany: 7.8%

Watch BBC report.

U.S. Home Prices Tumble Again

The Standard & Poor's Case-Shiller index was revealed today showing that U.S. home prices fell once again in November. In fact, most metropolitan markets posted declines.
In spite of lower prices and record low interest rates there is still an overwhelming number of foreclosures,

David M. Blitzer, chairman of the index committee at S&P Indices, noted that for November, the Case-Shiller index of 10 major metropolitan areas and the 20-city index both fell 1.3% from the previous month. that 19 of the 20 major U.S. metropolitan markets covered by the indices in November saw prices decline from October.

"The only positive for the month was Phoenix, one of the hardest hit in recent years," "Annual rates were little better as 18 cities and both composites were negative."

The 10-city and 20-city composites recorded negative annual returns of  3.6% and 3.7%, respectively, versus November 2010.

European Banks to Borrow a Trillion in February

Last time the ECB offeed generous loans to European banks they borrowed a record 489B Euros. The Financial Times says next time they will take a trillion in long-term refinance operations (LTRO).

"European banks are preparing to tap the European Central Bank’s emergency funding scheme for up to twice as much as the ECB supplied in its debut €489bn auction last month, providing further evidence of the sector’s liquidity squeeze.


Several of the eurozone’s biggest banks have told the Financial Times that they could well double or triple their request for funds in the ECB’s three-year money auction on February 29.

“Banks are not going to be as shy second time round,” said the head of one eurozone bank at last week’s World Economic Forum in Davos. “We should have done more first time.”

Three bank chief executives, all of whom asked to remain anonymous, said they were planning to increase their participation twofold or threefold".

Italy, Spain, and Belgium Downgraded Two Notches

The Euro mess continues. Today, Fitch Ratings cut the credit ratings of Italy, Spain, belgium and two others, stating that "they lack financing flexibility in the face of the regional debt crisis".


Italy was cut two levels to A- from A+. Spain was cut to A from AA-. Belgium’s was cut to AA from AA+, Cyprus to BBB- from BBB, and Slovenia was downgraded to A from AA-.

Fitch said that the countries downgraded today still lack financial flexibility.

“The divergence in monetary and credit conditions across the euro zone and near-term economic outlook highlight the greater vulnerability” “These sovereigns do not, in Fitch’s view, accrue the full benefits of the euro’s reserve- currency status.”

Housing: The Tale of Two Countries: U.S. Worst on Record; Canada Soars

While the median value of a U.S. house sale dropped to $210,300 (figures announced today), in Canada the situation is quite different, with an average of over $340,000.

In te U.S. 2011 was the worst sales year on record (over 50 years)

A total of 456,749 homes traded hands via Canadian MLS® Systems in 2011. This stands broadly in line with the average over the past ten years, and represents an increase of 2.2 per cent from annual levels reported in 2010.

Says the Canadian Real Estate Association:


“The momentum in sales activity provides clear evidence that low interest rates continue to draw homebuyers to the housing market,” said Gary Morse, CREA President. “While buyers have become increasingly cautious, the hand off for sales activity going into the New Year suggests that Canada’s housing market will continue to benefit from low interest rates in 2012, and continue making a significant contribution to Canadian economic activity. Even so, prospects among housing markets and neighbourhoods differ, so buyers and sellers should talk to a local REALTOR® to understand how trends are shaping up where they live.”

The number of newly listed homes rose three per cent on a month-over-month basis, reversing an equivalent monthly decline in November. New listings rose in almost 70 per cent of local markets, including some of Canada’s most active.

With sales and new listings having climbed in tandem, the national housing market remained in balanced territory in December. The national sales-to-new listings ratio, a measure of market balance, stood at 54.8 per cent in December, down slightly from 55.5 per cent in November.

Based on a sales-to-new listings ratio of between 40 to 60 percent, just over half of local markets in Canada were balanced in December. This result is little changed from November.

The number of months of inventory represents the number of months it would take to sell current inventories at the current rate of sales activity, and is a further measure of the balance between housing supply and demand. Nationally, it stood at 5.8 months at the end of December, down from 5.9 months at the end of November. While it has held fairly steady near six months since April 2011 onward, it peaked in August, with December marking the fourth monthly decline and a return to where it stood at the end of the first quarter".

Sign of the New Troubled Times: Japan Posts a Very Rare Trade Deficit; First in 32 Years

This might as well go in the "shocking" category, as it is a very rare event. Japan has registered its first annual trade deficit since 1980.

As a result, the Yen dropped to one-month low against the dollar and the euro. Currency traders and speculators may unwind bullish bets on the currency.

Reuters: "Traders cited robust offers from Japanese exporters from 78 yen up to 79 yen although many expect selling in the currency to gather pace on steady unwinding of yen long positions placed by speculators, with model and macro funds also keen to sell.


In the options market, dollar/yen one-month risk reversals moved to 0.8 in favour of dollar calls, around the strongest dollar bias since 2003 and indicating some more gains for the greenback. Implied vols ticked higher but remained subdued at around 8 percent for the one-month."

Carney: U.S. May Never Fully Recover

Mark Carney, the illustrious and well-respected Bank of Canada governor said in in interview that the U.S. economy may never return to its glory days, and could take years to recover from its current state.

"The nature of the U.S. recovery, it's going to take a number of years before they get back to the U.S. that we used to know,"
"In fact, they are not in our opinion ultimately going to get back fully to the U.S. we used to know."

According to Carney, the weakness south of the border is costing the Canadian economy $30B annually in lost exports,

The Bank of Canada is also predicting a 0.6% drop in the Canadian economy, about $10B from the European economic crisis. However, Mr. Carney says consumer spending and business investment will prevent Canada from sliding backwards. These two sectors "will be key" in countering the slowdown outside Canada and government austerity measures at home.

"We see (growth) coming from the household sector, consumption continuing to grow around two per cent, more activity in housing than we previously had thought,"

"And then, importantly … is business investment still growing at a solid pace."

Success Reported in Converting Seaweed Into Oil, With No Loss of Arable Land

Scientists say they have unlocked the secret of turning its seeaweed sugar into energy.
The Science journal reports that the breakthrough was made possible by a newly engineered microbe which metabolizes all of the major sugars in brown seaweed, potentially making it a cost-competitive alternative to petroleum fuel. The technology could be developed to lead to commercialisation within the next three years.

The team is at the Berkeley, California-based Bio Architecture Lab. They engineered a form of E. coli bacteria that can digest the seaweed's sugars into ethanol.

Daniel Trunfio, chief executive officer at Bio Architecture Lab: "Our scientists have engineered an enzyme to degrade and a pathway to metabolise the alginate, allowing us to utilise all the major sugars in seaweed" [...] "makes the biomass an economical feedstock for the production of renewable fuels and chemicals,"

Says the Ottawa Citizen: The lab currently has four aquafarming sites in Chile where it hopes to scale up its microbe technology as the next step on the path to commercialisation in the next three years.

Seaweed is seen as an appealing option for biofuel because, unlike corn and sugar cane, it does not use arable land and so does not compete with crops grown for food.

Less than three percent of the world's coastal waters can produce enough seaweed to replace some 60 billion gallons of fossil fuel, according to background information in the article.

At peak production, seaweed could produce 19,000 litres per hectare annually, about twice the level of ethanol productivity from sugarcane and five times higher than the ethanol productivity from corn.

Fitsh Ratings Agency Says Greece Is Insolvent Now: Default On March 20 Payment

Fitch Ratings Managing Director Edward Parker said today that Greece is insolvent and probably won’t make a bond payment in March.


"The euro area’s most indebted country is unlikely to be able to honor a March 20 bond payment of 14.5 billion euros ($18 billion)" "Efforts to arrange a private sector deal on how to handle Greece’s obligations would constitute a default".

“The so-called private sector involvement, for us, would count as a default, it clearly is a default in our book,” “So it won’t be a surprise when the Greek default actually happens and we expect it one way or the other to be relatively soon.”

Chinese Data Comes In Weak, So That's Good For The Markets?

The headlines on some media entities today: "Stock index futures rose on Tuesday as investors looked to corporate profits as earnings season picks up and Chinese data fueled the belief the government may move to stimulate growth".


"China's economy grew slightly more than expected but at the weakest pace in 2-1/2 years, suggesting the government may act to increase growth in the near future."

You can't make this stuff up. Weak data, therefore, it's good (!?).

New UNG Low: Nobody Wants Natural Gas

Wow, for whoever shorted UNG:

"Gas Bears Boost Bets on ‘Catastrophic’" Bloomberg
According to Bloomie, hedge funds turned bearish on U.S. natural gas for the first time in eight weeks, blaming a big surplus and warmer-than-normal weather, which pushed the price to the lowest level in more than two years. Not to mention a new all-time low in the infamous UNG.

"The funds and other large speculators switched from bets that futures will rise to a bearish, or “short,” position of a net 10,344 futures equivalents in the week ended Jan. 10, according to the Commodity Futures Trading Commission’s Commitments of Traders report on Jan. 13".
“The funds that got short are feeling good right now,” Kyle Cooper, director of research for IAF Advisors in Houston, “As long as it stays this warm, prices have to go lower. With this type of weather, the storage surplus becomes catastrophic.”

"Seasonal Record Storage slipped 95 billion cubic feet in the week ended Jan. 6, compared with a five-year average decline of 128 billion, the Energy Department reported. Inventories rose to an all-time high of 3.852 trillion cubic feet on Nov. 18".

"Supplies may reach a seasonal record of 2.4 trillion cubic feet in March, which is when heating demand usually ends and producers begin piping more gas into storage, Cooper said. Unless production falls or cold weather bolsters demand, prices will drop to $2.40 per million Btu, and perhaps below $2, as gas overflows storage caverns and clogs pipelines, he said".

“This is a situation that has never been seen before,” “If we hit 2.4 trillion, you’re looking at storage capacity constraints by July or August where you literally have system problems because the system is so full.”

Same Ol' Europe: France Loses AAA Rating, Debt Talks in Greece Stopped (Still Debt Talks!?)

Apparently, some big hedge funds wanted out of the deal with Greece because they now do not wnat to lose any money at all, i.e, no voluntary 40% cut. I guess they'd expect that now that European banks have nearly free money. They expect who to pay exactly? Mind-boggling.

Shocking!  (Yet not surprising lately).

Bloomberg reports that France was downgraded  by Standard & Poor’s and lost is AAA rating.
"France’s AAA rating will fall by one level at S&P, Finance Minister Francois Baroin told France 2 television today. Slovakia, Italy and Austria are among other countries to be downgraded, European officials said. Germany will keep its top rating, a person familiar with the matter said. S&P may release its report at about 9 p.m. Brussels time.

The decisions came at the end of a week in which signs grew that Europe’s woes may be cresting as borrowing costs fell, evidence of economic resilience emerged and the European Central Bank said it had quelled a credit crunch at banks. The immediate impact on French and Italian borrowing costs was limited, with the yield on 10-year government bonds rising 3 basis points and 1 basis point, respectively".

The Real Retail Sales Growth in The U.S.

When economic figures are made publics and discussed, people often frget that there is inflation and population growth. I order to stay constant, certain values must rise at the combined of those rates or both, for example, GDP.

Another case is reail sales. Are retails sales in the U.S. really going up? Douglas Short has a very interesting chart showing retail sales adjusted for inflation and population growth.

He says: "The Retail Sales Report released this morning shows that retail sales in December were up 0.1% month-over-month (but the Census Bureau notes that the statistical confidence range is ±0.5%). That was well below the Briefing.com consensus forecast of 0.4% and Briefing.com's own expectation of 0.5%.


The charts below give us a rather different view of the U.S. retail economy and the long-term behavior of the consumer. The sales numbers are adjusted for population growth and inflation. For the population data I've used the Bureau of Economic Analysis mid-month series available from the St. Louis FRED with a linear extrapolation for the latest month. Inflation is based on the latest Consumer Price Index. December retail sales adjusted accordingly rose 0.1% month-over-month but only 2.4% year-over-year, far less than the 6.5% nominal YoY increase".
 
(click to enlarge)
 

Europe's Pension Bomb: $39 Trillions

The European Central Bank Even says that State-funded pension obligations in 19 of the European Union nations were about 5X higher than their gross debt combined. The countries had almost 30 trillion euros ($39.3 trillion) of projected obligations to their existing populations, this in 2009!

The top two (or worse two):

• Germany: 7.6 trillion euros
• France: 6.7 trillion euros

Similar to Japan, stable or falling birthrates, and people living longer (older), are adding to pressures, with the proportion of economic output devoted to spending on retirement benefits projected to rise by a quarter to 14 percent by 2060.

  

"Europe has the highest proportion of people aged over 60 of any region in the world, and that is forecast to rise to almost 35 percent by 2050 from 22 percent in 2009, according to a report from the United Nations. That compares with a global estimate of 22 percent by 2050, up from 11 percent in 2009". (Bloomberg)

Oil And The Straight of Hormuz

Ever wondered where exactly it is?

The oil shipping lanes: